SP Angel Morning View -Today’s Market View, Monday 18th September 2023

Gold holds onto gains from last week ahead of the FOMC decision

China continues to raise aluminium production 

MiFID II exempt information – see disclaimer below

Andrada Mining (ATM LN) – Further drilling results from the Lithium Ridge prospect, Namibia

First Tin (1SN LN) – Additional test work on Taronga Tin identifies route to commercial production

Galantas Gold* (GAL LN) – Surface drilling at Joshua confirms mineralisation extension at depth

Gemfields Group (GEM LN) – Emerald auction results

Ironveld Plc (IRON LN) – Operational update and working capital raised

Kodal Minerals* (KOD LN) – Dr Qingtao Zeng steps aside as Hainan Mining prepares to fund Bougouni mine construction  

Vast Resources (VAST LN) – Delays to diamond parcel recovery

Wishbone Gold* (WSBN LN) – Initial drilling at Cottesloe supports the geological model

Gold prices climb as traders dismiss US rate hike

• Gold prices rallied to $1,928/oz, their highest level since September 11^th.
• This week marks a series of Central Bank meetings, with the Fed expected to pause on Wednesday, the BoE expected to hike by 25bp on Thursday and Japan seen to provide updated guidance.
• The dollar continues to gain against a weaker euro and pound.
• Hedge funds are cutting bullish gold bets on COMEX.
• Gold has seen limited investor appeal this year as the market consensus shifts to soft landing expectations.

Iron ore prices pause rally as trouble among Chinese developers brews

• Iron ore prices slid 1% in Singapore to $122/t, sliding from six-month highs.
• Steel mills had been accumulating the key ingredient in anticipation of an elevated autumn demand season.
• Country Garden is due to pay $15m in interest today, which it avoided twice in September.
• Evergrande equity is selling off after police crack down on its speculative wealth management unit, arresting several staff members.
• Sino-Ocean Group is unable to repay its offshore debt and has implemented a restructuring process.
• However, coking coal and coke point to strength in demand, rising 4% and 2.5% respectively overnight.

Aluminium – China’s NSB reported primary aluminium output rose 3.1% in August to 3.6mt up 2.9% to 27.23mt ytd

• The rise is partly due to higher Yunnan hydroelectric power.
• China now produced some 61% of global production (IAI)

Economics

China – Developers to redesign apartment blocks for larger flats since the government dropped its one-child policy

• China House price index fell 0.1% yoy in August vs -0.1% in July.
• We would expect this need, and it really is a need if you are a three-child family shoehorned into a ‘one child’ purposed apartment, to persuade the government to subsidise the redevelopment of apartment blocks for larger families.
• Industrial production rose 4.5% yoy through August vs 3.7% in July.
• Retail sales climbed 4.6% yoy in August vs 2.5% in July.
• Unemployment 5.2% in August vs 5.3% in July
• Fixed nonrural asset investment 3.2% ytd yoy vs 3.4% in July

US – FOMC meeting results due decision Wednesday evening

• We do not expect a rate cut and feel there is a risk of a further 25bp rate rise given the impact of higher oil prices on inflation.
• Industrial production fell to 0.4% in August vs 0.7% in July and 0.2% yoy in August vs 0% yoy in July.
• Manufacturing output also fell to 0.1% in August vs 0.4% in July and -0.6% yoy in August vs -0.6% yoy in July.
• Capacity utilisation 79.7% in August vs 79.5% yoy in July
• NY Empire State manufacturing index rose to 1.9 in September vs -19.0 in August.
• Preliminary Uni of Michigan consumer sentiment index slipped further to 67.7 in September vs 69.5 in August.

ECB – Martins Kazaks, of Latvia central bank and ECB governing council indicates rate cuts are not consistent with macro environment

• Mr Kazaks would prefer for the ECB to “solve inflation in one attempt” and not have to come back with “larger interventions”.

EU – EU labour cost index rose 4.5% in Q2 vs 5% in Q1

• Wages growth came in at 4.6% in Q2 vs 4.9% in Q1

UK – Property rent climbed 12%yoy in August marking the strongest increase since the start of records, according to estimates from Hamptons, a real estate agent.

• The average rent in Britain is now £1,300 per month which is the highest level on record in the wake of high mortgage rates.

Congo – The government denies speculation on social media about a coup in the Republic of Congo, Bloomberg repots.

• Rumours of a military takeover surfaces on Twitter on Sunday at the time when long serving President Denis Sassou Nguesso (79) travelled to New York to attend the UN General Assembly this week.
• Sassou Nguesso has been in charge of the government for nearly four decades securing another five year term as president in elections two years ago.
• “Fanciful information suggests there may be serious events underway in Brazzaville… the government denies this fake news,” government spokesman Thierry Moungalla.a

Currencies

US$1.0663/eur vs1.0653/eur previous.Yen 147.67/$ vs147.74/$.SAr 18.974/$ vs19.004/$.$1.239/gbp vs$1.242/gbp.0.645/aud vs0.646/aud.CNY 7.291/$ vs7.274/$.

Dollar Index 105.27 vs 105.25 previous.

Commodity News

Precious metals:

Gold US$1,928/oz vsUS$1,917/oz previous

Gold ETFs 89.0moz vs 89moz previous

Platinum US$936/oz vs US$914/oz previous

Palladium US$1,252/oz vs US$1,251/oz previous

Silver US$23.14/oz vs US$23/oz previous

Rhodium US$4,100/oz vs US$4,100/oz previous

Base metals:

Copper US$ 8,447/t vs US$8,456/t previous

Aluminium US$ 2,204/t vs US$2,210/t previous

Nickel US$ 20,100/t vs US$20,260/t previous

Zinc US$ 2,538/t vs US$2,562/t previous

Lead US$ 2,268/t vs US$2,257/t previous

Tin US$ 26,205/t vs US$25,810/t previous

Energy:

Oil US$94.6/bbl vs US$94.2/bbl previous

Natural Gas US$2.664/mmbtu vs US$2.706/mmbtu previous

Uranium UXC US$62.10/lb vs US$60.75/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$120.7/t vs US$121.3/t

Chinese steel rebar 25mm US$536.8/t vs US$537.2/t

Thermal coal (1st year forward cif ARA) US$129.4/t vs US$128.5/t

Thermal coal swap Australia FOB US$166.0/t vs US$165.5/t

Coking coal swap Australia FOB US$313.0/t vs US$313.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$72,009/t vs US$72,171/t

Lithium carbonate 99% (China) US$22,288/t vs US$22,888/t

China Spodumene Li2O 6%min CIF US$2,510/t vs US$2,550/t

Ferro-Manganese European Mn78% min US$1,034/t vs US$1,033/t

China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$645/t vs US$645/t

Europe Vanadium Pentoxide 98% 6.4/lb vs US$6.4/lb

Europe Ferro-Vanadium 80% 29.25/kg vs US$29.45/kg

China Ilmenite Concentrate TiO2 US$316/t vs US$315/t

Spot CO2 Emissions EUA Price US$87.3/t vs  US$85.9/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

German auto production under growing pressure from China

• A recurring theme over the last couple of weeks has been European worry over China’s growing domination in the auto market.
• According to a report from the German Economic Institute (IW), imports of Chinese vehicles and parts to Germany jumped 75% in H1 ’23 – this includes cars made in China by non-Chinese brands, such as the all-electric BMW iX3. (Reuters)
• German vehicle and parts exports to China dropped 21% according to the same report.
• IW also reported that there are now eight Chinese automakers in the German market and they currently account for 1.5% of the vehicles sold in Germany.
• Europe is losing significance in the sector, with only Germany and Spain among the top ten auto producers worldwide, which in 2000 also included France, Britain, and Italy.

US EV sales accelerate to almost 1m vehicles per year

• EV sales in the US exceeded 7% of new vehicles for H1 ‘23
• It took almost 10 years for the first 1m EVs to be on US roads, two years to sell the next 1m and just over a year to sell the next.
• In the 12 months through to June, 977,445 EVs were sold in the US (Bloomberg Green)

Brazil to end tax exemption for imported EVs

• Brazil will end a tax exemption for import of EVs, gradually raising the duty to 35% over the next three years. (Reuters)
• Brazil-based carmakers have been lobbying for the measure, against pushback from Chinese manufacturers who sell EVs in the country.

Company News

Andrada Mining (ATM LN) 7.4p, Mkt cap £113m – Further drilling results from the Lithium Ridge prospect, Namibia

• Andrada Mining has released results from the remaining eleven of its 24 reverse circulation (RC) drill holes of a 24-holes (1,900m) scout drilling programme at the Lithium Ridge prospect located around 35km southeast of its Uis tin mine in Namibia.
• The company confirms that the drilling encountered mineralisation containing the lithium minerals, spodumene and petalite in all the holes of the programme.
• Andrada Mining also says that the drilling “indicates that the targeted pegmatites continue at depth, and these analytical results confirm the presence of significant lithium and associated tin mineralisation within multiple pegmatites”.
• Among the results highlighted in the announcement are
  • A 39m wide intersection at an average grade of 1.57% Li₂O, 0.16% tin and 56ppm tantalum from a depth of 16m in hole ATNN-17, including a 25m wide section at an average grade of 1.73% Li₂O from 54m depth; and
  • A 57m wide intersection at an average grade of 1.52% Li₂O, 0.15% tin and 58ppm tantalum from a depth of 15m in hole ATNN-23, including a 32m wide section at an average grade of 1.85% Li₂O from 30m depth; and
  • A 20m wide intersection at an average grade of 1.36% Li₂O, 0.16% tin and 44ppm tantalum from a depth of 20m in hole ATNN-24, including a 9m wide section at an average grade of 2.01% Li₂O from 27m depth; and
  • A 22m wide intersection at an average grade of 1.28% Li₂O, 0.14% tin and 72ppm tantalum from a depth of 27m in hole ATNN-25, including a 9m wide section at an average grade of 2.03% Li₂O from 27m depth.
• Chief Executive, Anthony Viljoen, said that the drilling results “confirm that the 6km of mineralisation at surface continues at depth”.
• He described the results as “commensurate with similar hard-rock resources globally”.
• The drilling was a series of angled holes inclined at 60⁰ which in conjunction with “the undulating dip angle of the pegmatites … [means that] … the intersections are assumed to be an indication of apparent thickness, which is greater than true thickness”.

Conclusion: RC drilling at Lithium Ridge has demonstrated continuity of pegmatite-hosted lithium mineralisation at depth. We await Andrada Mining’s plans for follow-up exploration with interest.

First Tin (1SN LN) 6.8p, Mkt Cap £19m – Additional test work on Taronga Tin identifies route to commercial production

• First Tin provides additional details from its recent end-to-end test work on the Taronga Tin bulk sample.
• The confirmation of easily liberated cassiterite suggests the potential for good-quality concentrate via gravity separation.
• Additional crushing, grinding, shaking and sulphide flotation suggests recovery rates of 55-58% of tin recovered into a >56% Sn concentrate.
• First Tin will use a coarse tin-only circuit for its DFS, with the option to improve recovery rates with additional optimization.
• The DFS is expected to be completed in 1Q24.
• The three-stage crushing circuit will use a jaw and two cones, operating for 10hrs per day.
• Vertical impact crushers will be operated 24hr/day.
• Magnetic separators and sulphide flotation will be used before being thickened before stored.
• Management believes the flow sheet presents a cost-effective route to producing a saleable concentrate with low CAPEX and OPEX requirements.

Galantas Gold* (GAL LN) 14.5p, Mkt Cap £17m – Surface drilling at Joshua confirms mineralisation extension at depth

• The Company released assay results from the first hole from the new surface drilling programme at the Omagh Gold Project in Northern Ireland.
• Hole FR-DD-23-196 results returned 2.5m at 13.1g/t Au and 91.6g/t Ag from 132m vertical depth.
• True width of the intersection is estimated at 1.5m.
• The drill hole was designed to test the continuation of the predicted dilation zone at the Joshua Vein and completed between holes completed earlier that returned intersections of 2.1m at 21.2g/t Au and 5.6m at 12.4g/t in 2012 and 2013 drilling programmes, respectively.

Conclusion: Drilling results return high grade gold mineralization intersection confirming continuation of the mineralisation down dip and potentially expanding estimated mineral resource at the Joshua Vein.

*SP Angel acts as Broker to Galantas Gold

Gemfields Group (GEM LN) 13.25p, Mkt Cap £162m – Emerald auction results

• Gemfields reports that an auction of emeralds from its 75% owned Kagem mine in Zambia, which took place between 29^th August and 15^th September, has sold all 43 lots offered realising a total of US$25.5m at an average price of US$7.51/carat.
• The company says that the “auction … [offered] … commercial quality emeralds contained a higher than usual proportion of lower value grades”.
• Gemfields’ Managing Director of Product & Sales, Adrian Banks said that the “auction results … demonstrate that the emerald market remains in excellent shape and wish our auction partners much success during this important tradeshow season”.

Ironveld Plc (IRON LN) 0.27p, Mkt cap £10m – Operational update and working capital raised

• Ironveld report that its Rustenburg smelting facility was delayed by power limitations, but this is now resolved.
• The final of three smelter furnaces is set to start in October.
• The group expects to install an LNG-solar hybrid system from 1Q24.
• Ironveld has also been smelting third party material whilst waiting for generator installation, with plans to increase smelter capacity for third party material going forward.
• Funding from the JV with SEAM has been advanced, with processing equipment expected to be installed over the next four weeks.
• The Company’s directors have advanced £500k for working capital through a working capital loan facility agreement.
• The agreement will see an 11% pa interest rate over 6 months, alongside 62.5m warrants issued to lenders exercisable at 0.8p/share.

Kodal Minerals* (KOD LN) 0.59p, Mkt Cap £101m – Dr Qingtao Zeng steps aside as Hainan Mining prepares to fund Bougouni mine construction  

(Kodal / Hainan jv deal long-stop date to 30 September 2023)

• Kodal Minerals reports the resignation of Dr Qingtao Zeng as a non-executive director.
• Dr Zeng has represented Kodal’s largest shareholder, Suay Chin International since 2017
• Dr Zeng’s lithium expertise helped to direct Kodal in its development of the Bougouni lithium project in Mali and helped Kodal advance the Bougouni project towards its final development and construction phase.
  • “Dr Zeng has tendered his resignation for personal reasons.”
• Hainan Mining has the option to outbid Suay Chin International on lithium spodumene production from the Bougouni project.
• The full financing with Hainan Mining is expected to complete before end September.
• Kodal recently received a $3.5m advance prepayment on the subscription agreement from Hainan.
• The full funding package is for US$100m investment into the Bougouni project plus a $17.75m subscription for 3,550m shares.
• Kodal also expects to receive £1.6m from the completion of the sale of Bougouni West to its near neighbour, Leo Lithium.
• Restructuring: Kodal has completed registration of the new mining company, Le Mines de Lithium de Bougouni SA, a 100% subsidiary of Kodal in the UK.
• In addition, the Company is finalising the transfer of the shareholding of Future Minerals SARL to also be 100% owned by KMUK.
  • “Kodal is continuing to work with the Mali Government to finalise the remaining compliance items that will complete the conditions precedent for the Funding Transaction.
  • Hainan and Xinmao have confirmed that all approvals obtained from the Chinese Government remain valid and are ready to complete the transaction as and when the outstanding conditions precedent are satisfied.”
• The Kodal team met with the new Minister of Mines for Mali, Professor Amadou Keita, in Bamako in August.
  • “The Minister of Mines acknowledged the progress and the investment the partners will be making in Mali and continued to express the Government’s support for the project and all assistance that the Ministry can provide.”
• Leo Lithium, which holds the Goulamina Lithium Project next to Bougouni, has suspended its shares again pending an announcement.
• The company recently entered into a new equity investment agreement with Ganfeng, its partner whereby Ganfeng took an additional 5% interest in the Goulamina project.
• We suspect Leo Lithium is keen to start the export of run-of-mine ore (DSO) ahead of the production of spodumene concentrate.

Conclusion:  We see Dr Zeng’s resignation as a precursor to Hainan Mining’s funding of the Bougouni project.

*SP Angel acts as financial advisor and broker to Kodal Minerals

Vast Resources (VAST LN) 0.22p, Mkt Cap £7m – Delays to diamond parcel recovery

• The Company reports delays to the recovery of the historic parcel of rough diamonds (129,400cts) held in the Reserve Bank of Zimbabwe.
• Delays are attributed to the recent election process over the course of the past month when incumbent President Mnangagwa (80) won his second and final five year term in the office securing 52.6% of total votes.
• Previously, the central bank was expected to outline the process for handover of the parcel to the Company including valuation for royalty purposes, export permits and Kimberly Process Certification.

Wishbone Gold* (WSBN LN) – 2.05p, Mkt Cap £5.2m – Initial drilling at Cottesloe supports the geological model

See link for recent note: CLICK FOR PDF

• Wishbone gold reports that its initial five reverse-circulation (RC) drill holes at the Cottesloe project in WA support the company’s geological concept for sediment-hosted base metal mineralisation.
• The drilling has encountered “Large sulphidic and pyritic shale zones encountered with widths over 70m” in a geological context analogous to the mineralisation at the Nifty mine.
• Although today’s announcement does not report assay results from the drilling it explains that “Initial onsite XRF (X-ray fluorescence spectroscopy) results show elevated Cu (copper), Pb (lead), Zn (zinc), Co (cobalt), Ni (nickel), K (potassium), V (vanadium), Ti (titanium) present in RC drill chips”.
• The company concludes that it’s drilling so far “confirms the architecture and target zones are consistent with the exploration model”.
• Wishbone Gold confirms that diamond-drilling is expected “to start in the coming weeks and costs are to be 50% funded by the WA Government’s EIS scheme up to a total of $220,000 of direct drilling costs”.
• Chairman, Richard Poulden, said that the diamond-drilling should “reveal the scale of Cottesloe and the merit of the exploration model”.

Conclusion: Initial drilling provides support to the exploration model and we look forward to assay results and the outcome of the forthcoming diamond drilling to establish initial indications of grade.

*SP Angel acts as a Broker for Wishbone Gold

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